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TMI Blog2018 (2) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the learned Commissioner of Income Tax-(Appeals)-XIII, New Delhi has erred in law in confirming the disallowance of Rs. 67,62,806/- out of Legal and Professional Expenses by upholding that expenses incurred for availing professional services in connection with issue of preference shares were capital in nature. 4. That the appellant craves leave to add, alter, amend, substitute, withdraw and/or vary any grounds of appeal at or before the time of hearing. 2. Briefly stated facts of the case are that during the year under consideration, the assessee company was engaged in real estate business. The assessee filed return of income on 29/09/2008 declaring total income of Rs. 81,07,06,846/-. The case was selected for scrutiny and notice under section 143(2) of the income tax Act, 1961 (in short 'the Act') was issued and complied with. The assessment was completed under section 143(3) of the Act on 30/12/2010 and total income was assessed at Rs. 82,07,00,770/- after making certain disallowances. Aggrieved, the assessee filed appeal before the Ld. CIT-A, who partly allowed the appeal. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the assessee claimed that amount of TDS of Rs. 5,60,835/- as business expenses and since said amount of TDS was paid to the government account,, it was a business expense and it was immaterial whether the TDS amount was claimed by the party are not. However the Ld. CIT-A was not convinced with the explanation of the assessee and accordingly he confirmed the disallowance. The relevant finding of the learned CIT-A is reproduced as under: "5.3 Decision. I have considered the observation of the Assessing Officer and submission of the appellant. During the year appellant has made provisional claim for legal and professional expenses of Rs. 49,50,000/-. On this claim appellant had deducted TDS of Rs. 5,60,835/- and deposited the same to the government account. This provision was reversed by the appellant in subsequent year and an amount of Rs. 43,89,165/- was offered as income in A.Y. 2008-09. The appellant claimed the TDS amount of Rs. 5,60,835/- as expenditure in the P&L account. In the assessment order ASSESSING OFFICER has accepted the appellant's claim of having offered Rs. 43,89,165/- as income in A.Y. 2009-10. However the claim of expenditure on account of TDS o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has claimed the amount of Rs. 5,60,835/- as business expenditure out of the amount of Rs. 49,50,000/- in the year under consideration. Now the question before us is whether this amount of Rs. 5,60,835/- is an allowable expenditure in the year under consideration. The assessee claimed that said amount of Rs. 5,60,835/-has been paid to the Government account as TDS, and therefore it is a business expenditure allowable to the assessee. In our opinion, this contention of the assessee is not tenable. The tax has been deducted as tax liability of the deductee and it is not the tax liability of the assessee. In other words the tax deducted at source is the amount paid to the government on behalf of those parties, which means the said amount has been paid to those parties. Now the question arises whether this amount paid to those parties is allowable to the assessee, when those parties have not rendered any services and the balance liability of Rs. 43, 89, 165/-has already been written back by the assessee in subsequent assessment year. In our view, the amount of Rs. 5, 60, 835/-deposited as TDS, is an expenditure, which the assessee has failed to explain as incurred wholly an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: "6.3 Decision. I have considered the observation of the Assessing Officer and submission of the appellant. It is observed that appellant has incurred an amount of Rs. 67,62,806/- towards payment to M/s Allen & Overy Shook Lin & Bok for providing legal and professional services for issue of redeemable preference shares during the Financial Year 2006-07 to M/s Kidson Pte. Ltd. This issue of redeemable preference shares transaction had taken place during the period 12th September 2006 to 11th January 2007. M/s Allen & Overy Shook Lin & Bok raised their bill dated 16.01.2007 in favour of Deutsche Bank AG, Honkong Branch. This bill was in turn received by the appellant company in the month of November, 2007 for payment to M/s Allen & Overy Shook Lin & Bok towards the professional services rendered during the period 12th September 2006 to 11th January 2007 for issue of preferential shares. After receipt of the bill, the approval of the competent authority and certificate form CA in Annexure B was obtained for remittance after deducting TDS, Tin: TDS on such payments was deducted @11.33% on 05.01.2008 and actual amount of Rs. 59,84,405/- was remitted to M/s Allen & Overy Shook Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents:- Hindustan Gas & Industries Ltd. v. Commissioner of Income-tax 117 ITR 549 (Cal.) Section 37(1) of the income-tax act, 1961-business expenditure-whether expenditure incurred for preparing prospectus and payment of underwriting commission and brokerage for issue of redeemable preference shares was decuctible as revenue expenditure-held, no, expenditure in question was capital in nature Facts The assessee-company incurred expenditure of Rs. 10,080 and Rs. 50,687 respectively for payment of solicitors' fees for preparing a prospectus for issue of redeemable preference shares and for payment of underwriting commission and brokerage for the issue of these shares and claimed deduction of the expenditure in its assessment. The ITO disallowed the claim on the ground that the expenditure was not of a revenue nature. The AAC confirmed the ITO's order. It was contended before the Tribunal that, as there was hardly any difference between redeemable preference shares and debentures and as it was held by the Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52 , that a loan was not an asset or advantage of an enduring nature and that there was no distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were capital in nature. Therefore, the same are held as capital expenditure. The case laws relied upon by the appellant are relevant to issue of bonus shares and debentures and not related to expansion of preference share capital and raising of the issued capital. Therefore, the same are not applicable to the appellant's case. Hence, the submission of the appellant is rejected and disallowance made by the ASSESSING OFFICER is confirmed." 5.2 Before us, the learned counsel of the assessee relied on the submission made before the Ld. CIT-A and submitted that issue in dispute may be restored back to the file of the Assessing Officer for verification of the facts. 5.3 On the contrary, the Ld. Sr. DR supported the finding of the Ld. CIT-(A) and requested to uphold the same. 5.4 We have heard the rival submission and perused the relevant material on record. The issue in dispute in the present ground before us is whether the legal and professional expenditure of Rs. 67,62,860/- is in relation to raising of share capital. If it is related to raising share capital, then in view of the decision of the Hon'ble Supreme Court in the case of Punjab state industrial allotment Corporation Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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